Durable goods fell by 1.4% in February. Bloomberg was calling for the headline to be up by 0.7%, and Dow Jones was calling for the reading to be up by a smaller 0.2%.
Another negative in this durable goods report was that January’s initial 2.8% gain was revised lower to a gain of 2.0%. If you combine the miss for February and the lower overall drop in January, it seems as though economists may lower their estimates for first quarter gross domestic product.
On an ex-transportation basis in February, durable goods were down by 0.4%; ex-defense was a reading of -1.0%.
If investors and economists want a so-called core durable goods reading, it is in the orders for nondefense capital goods excluding aircraft. This core reading was also in the red, falling 1.4% from January. Unfortunately, this was the sixth month of declines. This trend indicates that businesses are battening the hatches currently.
What is interesting is that the durable goods numbers were bad enough that they actually created equity buying in the futures. S&P 500 futures were down less than a point and DJIA futures were down by only 20 points. The logic here may seem funny, but it is true right now — the overall economy is still growing, but this is weak enough that it puts the need for any Fed rate hikes to be too fast or too furious further out. Sometimes the markets are just goofy like that.
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Key points from the durable goods release were as follows:
- Transportation equipment fell by $2.5 billion, or 3.5%, to $69.5 billion.
- Shipments of manufactured durable goods fell $0.5 billion, or 0.2%, to $244.0 billion.
- Inventories of manufactured durable goods rose by $1.1 billion, or 0.3%, to $413.0 billion.
- Unfilled orders for manufactured durable goods fell by $5.6 billion, or 0.5%, to $1,156.9 billion.
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